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How Obama will cut $4 trillion off US budget

TONY EASTLEY: Insults are flying again in Washington - this time over US president Barack Obama's plan to fix America's mountainous budget deficit.

President Obama wants cut the deficit by $4 trillion. That's three times the total value of the Australian economy. He wants to do it by introducing tax increases and cuts in defence spending but he's leaving the social security system largely intact.

Republicans are accusing him of engaging in class warfare by only targeting the wealthy.

Washington correspondent Craig McMurtrie reports.

POLITICAL COMMENTATOR 1: This was the announcement speech of his re-election campaign.

POLITICAL COMMENTATOR 2: Very few details. He may be outsourcing again to Congress.

POLITICAL COMMENTATOR 3: Here's the problem. The American people are asking for clarity, for direction...

CRAIG MCMURTRIE: It was billed as Barack Obama's plan to deal with America's ballooning debt problem.

The president wants to reduce borrowing by $4 trillion over the next 12 years by cutting domestic spending and unlike Republicans - defence.

BARACK OBAMA: The greatest long-term threat to America's national security is America's debt.

CRAIG MCMURTRIE: Next month the US is expected to hit its legal debt ceiling of $14.3 trillion.

Congress has to vote to increase the national credit card limit or face the unthinkable, the possibility of America defaulting on its obligations.

Republicans are demanding big concessions from Democrats ahead of that vote and have already produced their own deficit cutting plan, one that overhauls Medicare and cuts health spending but doesn't involve increasing taxes.

Republican Senate leader Mitch McConnell:

MITCH MCCONNELL: We don't believe a lack of revenue is a part of the problem and so we will not be discussing raising taxes.

CRAIG MCMURTRIE: But in his proposal the president is demanding that Congress raise taxes for the wealthy.

BARACK OBAMA: They want to give people like me a $200,000 tax cut that's paid for by asking 33 seniors each to pay $6,000 more in health costs.

That's not right. That's not going to happen as long as I'm president.

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